This invention relates generally to a method of determining the optimal commitments of energy and ancillary services for wholesale energy market clearing and pricing. In particular, the invention pertains to the optimal selection of offers submitted by market participants to satisfy energy and ancillary service requirements for regional electricity markets while satisfying operating and security constraints. It may be used by electricity market operators such as Regional Transmission Organizations, Independent System Operators, and Independent Transmission Providers. It may also be used by market participants as a tool to study various possible bidding strategies and to simulate possible market results.
A brief description of how electricity markets function under the Federal Energy Regulatory Commission (“FERC”) regulations may be helpful in understanding the field of the present invention. In April 1996, FERC Order 888, “Promoting Wholesale Competition Through Open Access Nondiscriminatory Transmission Services by Public Utilities,” required jurisdictional public utilities to file open access transmission tariffs to allow competition in the supply of wholesale electrical energy. Under the Order 888 market entities (utilities, merchant generators, energy traders, etc) compete to provide energy based on several factors including cost and availability of transfer capacity on transmission facilities. Market entities can be limited from providing energy to certain regions based on the availability of transfer capacity on transmission facilities. This order had the effect of introducing competition by allowing access to the transmission system to allow transportation of electricity from buyer to seller.
A next stage in the development of electricity markets was the FERC Order 2000, “Regional Transmission Organizations,” issued in December 1999. This order required jurisdictional public utilities to form and participate in a Regional Transmission Organization (“RTO”). The operational control of generators, and transmission facilities was assigned to the Regional Transmission Organization. Under FERC regulations, RTOs are required, among other things; to ensure that its transmission customers have access to an ancillary services and real time balancing market. An RTO may cover parts of one or more states within the United States. RTOs are required to maintain efficient traffic grid management, to improve grid reliability, to monitor and mitigate against opportunities for discriminatory transmission practices, and to improve competition in the wholesale electricity markets. The RTO is expected to administer the open access transmission tariff, to exercise operational control over congestion management, reliability and to plan the expansion of its transmission system. An additional set of requirements for RTOs are that they remain independent of the market participants.
FERC also authorized the startup of several regional electricity markets, including the PJM, ISO NE, NYISO, and the CAISO. These markets had different rules including those that govern a wholesale spot market for electrical energy. The operators of these markets are faced with the need to select offers provided by market participants that satisfy requirements and operating constraints.
The next stage in the development of electricity markets is the July 2002, FERC Notice of Proposed Rulemaking (NOPR), “Remedying Undue Discrimination through Open Access Transmission Service and Standard Electricity Market Design.” This NOPR announces FERC's intent to form a standard market design for wholesale electrical energy that would apply to all jurisdictional utilities This NOPR requires public utilities to place their transmission assets that are used in interstate commerce under the control of an Independent Transmission Provider or ITP. Among other functions, an ITP is responsible for operating a day ahead market and a real time market for electrical energy and ancillary services.
In the day ahead market for electricity, spot market prices are generally determined based on offers to supply energy and on forecast requirements for load. One possible solution is to determine a supply curve using either marginal costs or bid prices to rank order the plants beginning with the cheapest plants. Bids are selected starting with the cheapest and ascending until requirements are satisfied. However, it is necessary to consider operational constraints, which leads to selection of bids out of merit order. Heuristic methods are used to determine which bid to select out-of-order. There are, however, better possible approaches that are based on optimization. Additionally, the FERC NOPR recognizes that to create a truly competitive wholesale power market, the market must also allow for price responsive loads.
In this framework, the market operator receives pricing information from various wholesale market generators (typically coal-fired power plants, hydroelectric power plants, nuclear power plants, etc.) and receives energy requirements information from the Load Serving Entities The market operator is then responsible for determining an operating plan based on the offers provided by the various market generators and the bids provided by the various Load Serving Entities in the most cost effective manner.
Optimization tools are necessary to determine market clearing and commodity pricing based on submitted offers, while meeting operating and security constraints. This invention addresses the needs of a market operator by allowing the modeling of the technical characteristics of the offers as well as the transmission operating and security constraints. Offers include the supply of ancillary services by means of generating units and as well as price sensitive loads. The invention allows the selection of the optimal choice among the offered products based on selected criteria such as minimizing the payments made by the market operator to the market suppliers. The present invention address the above noted needs by facilitating an efficient day ahead clearance and pricing mechanism for complex co-optimized solutions for trading of energy and ancillary services.